British firms were more optimistic than their American, Japanese, German and
French counterparts in terms of expected activity

Optimism among British firms is at an all-time high, a respected survey has found, with UK business growth expected to outpace all other advanced economies next year.

Markit’s quarterly global business survey found that in the three months to the end of October, British firms were more optimistic than their American, Japanese, German and French counterparts in terms of expected activity, revenue and new business growth over the next 12 months.

There were also signs firms were willing to spend more on big projects. Expectations for capital expenditure among UK firms picked up significantly, following years of stagnant growth.

Markit, which releases monthly data that are closely watched by the Bank Of England, said the expected rate of growth in UK business activity was at its highest since it began collecting data in 2005, with a positive “balance” of 61pc of firms predicting an improvement, from 51pc in the previous three months.

This compares with 41pc in the US and 29pc in Germany. Only Brazilian firms, buoyed by expectations of higher growth from next year’s World Cup and Olympics, were more optimistic.

The outlook for employment in the UK also brightened. Only Ireland, which is soon due to exit its €85bn bail-out programme and return to the markets was more optimistic. Last week, Mark Carney, the Governor of the Bank of England, said 60,000 new jobs were being created a month in the UK, while data from the Office for National Statistics show a record 29.95m Britons are now in work.

Chris Williamson, chief economist at Markit, said a broad range of factors were behind the improvement. “The eurozone crisis is abating, the region is pulling out of recession, the US fiscal worries are easing and also worries about a hard landing in China have abated, so all of the worries that we had a year ago have eased, leaving a better environment to operate in and making companies feel more comfortable about making major investment decisions,” he said.

By contrast, Markit’s survey of 11,000 businesses found that Spanish firms were only beginning to turn the corner in terms of capital expenditure, while employment growth remained in negative territory.

Markit’s UK data showed the “renting and business activity” sector dominated the league tables in terms of new revenue growth and employment prospects. Many firms in this sector reported a strong pick-up in demand over the past three months, led by a housing market revival. In the manufacturing sector, electrical firms said they had benefited from new product launches.

Markit said the hotels and restaurants sector continued to struggle. Mr Williamson said this, combined with the recent pick-up in manufacturing and construction, provided evidence that Britain’s recovery was not being purely driven by a rise in consumer spending. Several hotel and restaurant businesses surveyed by Markit said they were reluctant to take on new staff.

“Many businesses that operate in consumer-facing parts of the economy have struggled, and for quite well documented reasons,” said Mr Williamson. “We’ve seen real wages fall for four years now, and high unemployment and widespread job security worries, especially in the public sector.

“That has hit companies such as hairdressers and restaurants which are often than not dependent upon discretionary spending.”

The Telegraph Investor

Editor's comment:

Priced to be great value for new investors and those with large portfolios.